Prepared by: The Florida Department of Transportation Office of the Comptroller General Accounting Office

Transcription

1 Financial Statements (Unaudited) of the State of Florida Department of Transportation Everglades Parkway Alligator Alley Toll Road Fiscal Year Ended June 30, 2011 Prepared by: The Florida Department of Transportation Office of the Comptroller General Accounting Office

2 Management s Discussion and Analysis

3 Management s Discussion and Analysis This section of the Florida Everglades Parkway s (Parkway) annual financial report presents our discussion and analysis of the Parkway s financial performance during the fiscal year ended June 30, OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the Parkway s financial statements. The financial statements of the Parkway report short and long-term information using accounting methods similar to those used by private sector companies. The Parkway s financial statements consist of: Statement of Net Assets This statement presents information on all of the Parkway s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets are useful indicators of whether the Parkway s financial position is improving or deteriorating. Statement of Revenues, Expenses, and Changes in Fund Net Assets This statement presents information showing how the Parkway s net assets changed during the fiscal year. Statement of Cash Flows This statement presents information about the Parkway s cash receipts and cash payments, or, in other words, the sources and uses of the Parkway s cash and the change in cash balance during the fiscal year. Notes to the Financial Statements The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the basic financial statements. Other Certain required supplementary information is presented to disclose trend data on the infrastructure condition of the Florida State Highway System. The Parkway is a component of the State Highway System designated by the Florida Legislature. FINANCIAL ANALYSIS Net Assets - As noted above, net assets may serve over time as a useful indicator of a government s financial position. In the case of the Parkway, assets exceeded liabilities by $47.1 million as of June 30, 2011, and $38.1 million as of June 30, The Parkway s current assets decreased by $4.45 million, or 27.6%, from $16.1 million in fiscal year 2010 to $11.65 million in fiscal year The decrease was primarily due to partial liquidation of the renewal and replacement investments to fund ongoing resurfacing projects and the recent economic decline. 1

4 Management s Discussion and Analysis Current liabilities decreased by $11.9 million, or 74%, from $16.1 million in fiscal year 2010 to $4.2 million in fiscal year The decrease of $11.9 million was the result of resurfacing projects which started with the first segment in fiscal year The Florida Department of Transportation (the Department ) pays for these projects and the Parkway reimburses them. As of June 30, 2011, $1.7 million of resurfacing costs are expected to be reimbursed to the Department in the subsequent fiscal year. The largest portion of the Parkway s net assets as of June 30, 2011 reflects its investment in capital assets (land, infrastructure, buildings, etc.), net of any related outstanding debt issued to acquire the assets, of $38.8 million. The Parkway uses these capital assets to provide services to its customers. Consequently, these assets are not available for future spending. Net assets also include $8.3 million restricted for debt service. Parkway's Net Assets (in Thousands) Current and other assets $ 11,657.9 $ 16,109.3 Capital assets 76, ,311.3 Total assets 87, ,420.6 Current liabilities $ 4,238.8 $ 16,100.6 Long-term liabilities 36, ,238.2 Total liabilities 40, ,338.8 Net assets Invested in capital assets 38, ,391.3 Restricted for debt service 8, Changes in Net Assets Routine Operations and Maintenance (O&M) expenses increased $700 thousand, or 11.2%, from $6.4 million in fiscal year 2010 to $7.1 million in fiscal year Every year, a reconciliation is done for Florida Highway Patrol (FHP) costs for the year. In fiscal year 2010, the Department s O&M expenses included $200,000 of revenue received from FHP as a result of the reconciliation done for fiscal year The result of the reconciliation done for fiscal year 2010 resulted in an additional $50,000 being paid to FHP, which was paid in fiscal year This contributed in large part to the change in O&M from fiscal year 2010 to fiscal year Preservation expenses decreased $12.2 million from $13.9 million in fiscal year 2010 to $1.7 million in fiscal year The decrease is related to the winding down of a major resurfacing effort to resurface the entire Parkway which began in fiscal year The 2

5 Management s Discussion and Analysis project should be substantially completed by the end of the 2012 fiscal year. Total resurfacing costs are estimated at approximately $90 million. Operating revenues decreased slightly from $19.9 million in fiscal year 2010 to $19.7 million in fiscal year The decrease can primarily be attributed to economic conditions, as well as an increase in SunPass participation, which charges a lower toll rate than cash. Interest income increased $3 thousand from $44.5 thousand in fiscal year 2010 to $47.5 thousand in fiscal year This increase is primarily attributed to an increase in interest revenue from the Parkway s SunPass operations toll account. Parkway's Changes in Net Assets (in Thousands) Operating expenses: Routine operations and maintenance $ 7,071.6 $ 6,360.0 Preservation 1, ,896.0 Depreciation Amortization and interest 1, ,896.2 Total operating expenses 10, ,340.5 Operating revenues: Toll revenues 19, ,948.1 Fines, forfeits, judgments and settlements Total operating revenues 19, ,961.7 Non-operating revenues: Interest income Gain/(loss) on disposal of property (1.6) (0.7) Total non-operating revenues Increase/(decrease) in net assets 9,024.2 (2,335.1) Net assets beginning of period 38, ,416.8 Net assets end of period $ 47,105.9 $ 38,081.7 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets - At June 30, 2011, the Parkway had invested $76.2 million in capital assets (net of accumulated depreciation), which is $123.7 thousand lower than its investment at June 30,

6 Management s Discussion and Analysis As of June 30, 2011, the Parkway has no outstanding construction in progress. Capital Assets of the Parkway (in Thousands) Land $ 10,089.7 $ 10,089.7 Infrastructure 64, ,589.5 Depreciable capital assets 1, ,632.1 Total capital assets $ 76,187.6 $ 76,311.3 Modified approach for reporting infrastructure Governmental accounting and reporting standards permit an alternative to reporting depreciation for infrastructure capital assets, known as the modified approach. For its highway system and improvements, the Parkway maintains and preserves these assets at condition level ratings established by the Department. As a result, the Parkway does not report depreciation expense for its highway system and improvements; rather, costs for both maintenance and preservation of infrastructure capital assets are expensed in the period incurred. As detailed in required supplementary information included after the Notes to the Financial Statements, the State Highway System, which includes the Parkway, has exceeded its targeted infrastructure condition level ratings for the last several years. Non-current liabilities As of June 30, 2011, the Parkway has revenue bonds outstanding net of premium in the amount of $37.4 million. Of this amount, $1.59 million is due within the next 12 months. Series 1997 bonds in the amount of $55.2 million were issued in 1997, and the proceeds were restricted for designated capital projects along the Parkway such as new electronic toll equipment, building a parking facility and replacing existing toll collection facilities. As of June 30, 2011, all of the bond proceeds have been expended for the designated capital projects. In March 2007, $43.2 million in State of Florida Department of Transportation Alligator Alley Revenue Refunding Bonds, Series 2007A, were sold to refund the outstanding Series 1997 issue. Additional information on the Parkway s noncurrent liabilities can be found in Note 8 to the financial statements. 4

7 Basic Financial Statements

8 Statement of Net Assets Years Ended June 30, 2011 and 2010 Note ASSETS: Cash and cash equivalents 4 $ 826,135 $ 403,020 Investments 4 $ 10,574,325 $ 15,257,702 Receivables: Interest Receivable $ 196 $ 197,549 Toll Fees Receivable $ 37,979 $ Due from other funds $ 4,241 $ 4,687 Deferred Charges $ 215,066 $ 246,310 Land 7 $ 10,089,680 $ 10,089,680 Infrastructure 7 $ 64,589,337 $ 64,589,537 Depreciable Capital Assets Net of Depreciation 7 $ 1,508,548 $ 1,632,081 TOTAL ASSETS $ 87,845,507 $ 92,420,566 LIABILITIES: Due to Other Governments 6 $ 2,648,767 $ 14,575,581 Noncurrent liabilities: Due within one year 8 $ 1,590,000 $ 1,525,000 Due in more than one year 8 $ 36,500,848 $ 38,238,237 TOTAL LIABILITIES $ 40,739,615 $ 54,338,818 NET ASSETS: Invested in Capital Assets Net of Related Debt $ 38,792,565 $ 37,391,298 Restricted for Debt Service $ 8,313,327 $ 690,450 TOTAL NET ASSETS $ 47,105,892 $ 38,081,748 6

9 Statement of Revenues, Expenses, and Changes in Fund Net Assets Years Ended June 30, 2011 and 2010 OPERATING REVENUES: Note Toll Revenues $ 19,714,377 $ 19,948,100 Fines, Forfeits, Judgments and Settlements $ 22,564 $ 13,602 Total Operating Revenues $ 19,736,941 $ 19,961,702 OPERATING EXPENSES: Toll Operations: Operations and Maintenance 9 $ 7,071,639 $ 6,359,999 Preservation 9 $ 1,738,213 $ 13,896,023 Depreciation 7 $ 138,499 $ 188,288 Amortization and Interest Expense $ 1,810,385 $ 1,896,212 Total Operating Expenses $ 10,758,736 $ 22,340,522 Net Operating Income $ 8,978,205 $ (2,378,820) NONOPERATING REVENUES/EXPENSES: Interest Income $ 47,516 $ 44,485 Gain/(Loss) on Disposal of Property $ (1,577) $ (696) Total Non Operating Revenues/Expenses $ 45,939 $ 43,789 Increase/(Decrease) in Net Assets $ 9,024,144 $ (2,335,031) Net Assets - Beginning of the Year $ 38,081,748 $ 40,416,779 Net Assets - End of the Year $ 47,105,892 $ 38,081,748 The accompanying notes to the financial statements are an Integral part of this statement. 7

10 Statement of Cash Flows Years Ended June 30, 2011 and 2010 OPERATING ACTIVITIES: Cash received from customers $ 19,698,963 $ 19,961,756 Cash paid to vendors $ (20,383,515) $ (17,582,553) Cash paid to employees $ (352,706) $ (267,079) Net cash provided/(used) by operating activities $ (1,037,258) $ 2,112,124 CAPITAL AND RELATED FINANCING ACTIVITIES: Cash received from sale of capital assets $ $ 5,804 Payment of bond principal $ (1,525,000) $ (1,460,000) Payment of bond interest $ (1,922,638) $ (1,988,338) Purchase or construction of capital assets $ (16,343) $ Net cash used in capital and related financing activities $ (3,463,981) $ (3,442,534) INVESTING ACTIVITIES: Proceeds from sale or maturity of investments $ 106,594,546 $ 120,648,573 Purchase of investments $ (101,892,467) $ (119,123,568) Interest received/(paid) $ 222,275 $ (139,342) Net cash provided by investing activities $ 4,924,354 $ 1,385,663 Net Increase (Decrease) in Cash and Cash Equivalents $ 423,115 $ 55,253 Cash and Cash Equivalents, Beginning of Year $ 403,020 $ 347,767 Cash and Cash Equivalents, End of Year $ 826,135 $ 403,020 The accompanying notes to the financial statements are an integral part of this statement. 8

11 Notes to the Financial Statements

12 NOTES TO THE FINANCIAL STATEMENTS 1. REPORTING ENTITY The Florida Everglades Parkway (Parkway), also known as Alligator Alley, is a four-lane, controlled access, 78-mile toll facility in the southern portion of the State operated by the Florida Department of Transportation (the "Department"), which is an agency of the State of Florida. The Parkway is an integral part of Federal Interstate Highway I-75, connecting Naples on the Gulf of Mexico to Ft. Lauderdale on the Atlantic Ocean. The Department is responsible for its operation, maintenance, cash management and other financial matters. The 2011 and 2010 financial statements contained herein include only the accounts of the Parkway and do not include any other accounts of the Department or of the State of Florida. The Department has adopted Governmental Accounting Standards Board ("GASB") Statement No. 14, The Financial Reporting Entity, for the purpose of defining and reporting on the Parkway as a financial reporting entity. Based on the criteria in Statement No. 14, the Department has determined that there are no other units that meet the criteria for inclusion in the Parkway's financial statements. The Department has also adopted GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting. The statement requires proprietary funds to apply all applicable GASB pronouncements as well as those Statements and Interpretations of the Financial Accounting Standard Board ("FASB"), Accounting Principles Board Opinions, and Accounting Research Bulletins of the Committee on Accounting Procedure, issued on or before November 30, 1989, which do not conflict with or contradict GASB pronouncements. As also provided by Statement No. 20, the Department has elected not to adopt any FASB statements issued after November 30, 1989, unless so directed by the GASB. 2. LEGISLATION Section , Florida Statutes (F.S.), which applies to all toll facilities in the State, allows for the continuation of tolls after debt service has been retired. Subsection 4 provides the Department with the ability to sell revenue bonds to fund projects included in the adopted work program that specifically relate to the Parkway. In 1994, the Florida Legislature passed landmark legislation addressing the environmental concerns of the Everglades. Section , F.S., entitled Alligator Alley toll road, provides for the continuation of Parkway tolls to be used as a funding source to help restore the Everglades. The construction of the Parkway contributed to the alteration of water flows in the Everglades and affected the ecological patterns of the historical southern Everglades. Per Section (3), F.S., excess revenues (after operations and maintenance expenses, annual debt service, system improvements, and other contractual obligations) may be transferred to the Everglades Fund of the South Florida Water Management District for environmental projects to restore the natural values of the Everglades. Section (4), F.S., authorizes the South Florida Water Management District to issue revenue bonds and pledge the excess toll revenues from the Parkway as security for such bonds. 10

13 NOTES TO THE FINANCIAL STATEMENTS 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation - Fund Accounting - The accounting systems of the Department are organized on the basis of funds and account groups, each of which is considered an accounting entity having a self-balancing set of accounts for recording its assets, liabilities, fund equity, revenues and expenditures or expenses. The individual funds account for the governmental resources allocated to them for the purpose of carrying on specific activities in accordance with laws, regulations or other restrictions. The Parkway financial records consist of an enterprise fund within the Department. Enterprise funds are a type of proprietary fund. The focus of proprietary fund measurement is the determination of net income, financial position and cash flows. The generally accepted accounting principles applicable to proprietary funds are similar to those applicable to businesses in the private sector. Enterprise Fund - The Enterprise Fund is used to account for operations (a) that are financed and operated in a manner similar to private business enterprises - where the intent of the governing body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges; or (b) where the governing body has decided that periodic determination of revenue earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. The assets, liabilities, fund equity and results of operations of the Parkway are presented in the accompanying financial statements. Basis of Accounting - Basis of accounting refers to the timing of recognition of revenues and expenses in the accounts and reporting in the financial statements. Basis of accounting relates to the timing of the measurements made, regardless of the measurement focus applied. Proprietary funds utilize the accrual basis of accounting. Under this method, revenues are recognized when they are earned and expenses are recognized when they are incurred. Cash and Cash Equivalents - Cash includes cash on hand, on deposit in banks, and held at the State Board of Administration. The deposits are held by financial institutions qualified as public depositories under Florida law. Investments - Investments are valued at fair market value. Capital Assets - Capital assets are recorded at historical cost. Disbursements for maintenance and repairs are expensed as incurred. For depreciable assets, depreciation, on a straight-line basis, is charged over useful lives ranging from 15 to 30 years for buildings and 3 to 10 years for machinery and equipment. Infrastructure capital assets are recorded as highway system and improvements and are not depreciated. Property costs represent an historical accumulation of costs expended to construct, improve, and place in operation the various projects and related facilities. Costs are not reduced for subsequent replacements, as replacements are considered to be period costs and are included in renewals and replacements. These policies are consistent with practices followed by similar entities within the toll bridge, turnpike and tunnel industry and with the modified approach for reporting infrastructure assets as provided by GASB Statement No. 34. Modified Approach for Reporting Infrastructure The modified approach is an alternative to reporting 11

14 NOTES TO THE FINANCIAL STATEMENTS infrastructure capital asset depreciation, if two requirements are met. First, the assets should be managed using an asset management system that meets certain criteria. Second, the Department should document that the infrastructure is being preserved at or above a condition level established and disclosed by management. Significant aspects of the Department s modified approach policy are: The Parkway has made the commitment to preserve and maintain its infrastructure assets at levels equal to or greater than those established by the Department. Depreciation expense is not reported for infrastructure assets, nor are amounts capitalized in connection with improvements that lengthen the lives of such assets, unless the improvements also increase their service potential. Rather, costs for both maintenance and preservation of infrastructure capital assets are expensed in the period incurred. The Parkway relies on the Department to maintain an asset management system that has an up to date inventory of system infrastructure assets and that performs condition assessments of those assets, summarizing the results using a measurement scale. Using these results, management estimates the annual amount to maintain and preserve its infrastructure at a condition level established and disclosed by the Department. The disclosures required by GASB Statement No. 34 are presented in the Required Supplementary Information included after the Notes to the Financial Statements. Restricted Assets - Certain assets are required to be segregated from other assets due to various bond indenture agreements. These assets are legally restricted for specific purposes such as debt service, construction and renewals and replacements. Restricted Net Assets Restricted net assets are comprised of amounts restricted for debt service. It is the Parkway s policy to first use restricted net assets when an expense is incurred for purposes for which both restricted and unrestricted net assets are available. Net Assets Invested in Capital Assets, Net of Related Debt This component of net assets consists of capital assets, net of accumulated depreciation and reduced by the outstanding balances of bonds payable that are attributable to the acquisition, construction, or improvement of those assets. Risk Management - The Parkway participates in the various insurance programs established by the State of Florida for property and casualty losses and employee health insurance. Coverage includes, but is not limited to property, general liability, automobile liability, worker s compensation, crime, and federal civil rights actions. 4. CASH AND CASH EQUIVALENTS AND INVESTMENTS A. Deposits The Parkway s deposit and investment practices are governed by Chapter 280, F.S., and various legal covenants related to the outstanding bond issues. At June 30, 2011 and 2010, the Parkway s cash on deposit in its bank accounts was $446,713 and $392,307, respectively. Deposits are insured by federal deposit insurance or collateralized pursuant to Chapter 280, F.S. All collateralized deposits are considered insured. Chapter 280, F.S., generally requires public funds to be deposited in a bank or savings association that is designated by the state Chief Financial Officer as authorized to receive deposits in the State and that meets the collateral requirements. The Chief Financial Officer determines the collateral requirements and collateral pledging level for each Qualified Public Depository ( QPD ) following guidelines outlined in 12

15 NOTES TO THE FINANCIAL STATEMENTS Chapter 69C-2, Florida Administrative Code (F.A.C.), and Section , F.S. The Chief Financial Officer is directed by F.A.C. to review the Public Depository Monthly Reports and continually monitor the collateral pledging level(s) and required collateral of each QPD. If the Chief Financial Officer determines that a QPD has violated the law and rule and has not pledged adequate collateral and/or has not used the proper collateral pledging level or levels, the QPD is immediately notified of the fact and directed to immediately comply with the Chief Financial Officer s collateral requirements. Eligible collateral includes federal, federally guaranteed, state and local government obligations, corporate bonds, letters of credit issued by a Federal Home Loan Bank, and with the Chief Financial Officer s permission, collateralized mortgage obligations, real estate mortgage investment conduits and securities, or other interests in any open-end management investment company registered under the Investment Company Act of 1940, provided the portfolio of such investment company is limited to direct obligations of the United States ( U.S. ) government and to repurchase agreements fully collateralized by such direct obligations of the U.S. government, and provided such investment company takes delivery of such collateral either directly or through an authorized custodian. Statutes provide that if a loss to public depositors is not covered by deposit insurance, demanding payment under letters of credit, and the proceeds from the sale of collateral pledged or deposited by the defaulting depository, the difference will be provided by an assessment levied against other QPDs. B. Investments The Parkway currently invests in U.S. Treasury securities through the State Board of Administration. Further information may be obtained from the Chief Operating Officer Finance and Accounting, State Board of Administration of Florida, 1801 Hermitage Boulevard, Suite 100, Tallahassee, Florida 32308, (850)

16 NOTES TO THE FINANCIAL STATEMENTS At June 30, 2011 and 2010, the Parkway s cash, cash equivalents and investments consist of the following amounts stated at fair value: Cash Cash on deposit $416,417 $362,724 Cash equivalents 30,296 29,583 Cash held by the State Board of Administration 379,422 10,713 Total Cash $826,135 $403,020 Investments U.S. Government Securities held by the State Board of Administration $10,574,325 $15,257,702 Repurchase Agreements held by the State Board of Administration - - Total Investments $10,574,325 $15,257,702 Total Cash, Cash Equivalents and Investments $11,400,460 $15,660,722 Cash, cash equivalents and investments are presented in the Statement of Net Assets as follows: Assets: Cash and cash equivalents $826,135 $403,020 Investments 10,574,325 15,257,702 Total $11,400,460 $15,660,722 14

17 NOTES TO THE FINANCIAL STATEMENTS C. Deposit and Investment Risks Credit Risk Credit risk exists when there is a possibility the issuer or other counterparty to an investment may be unable to fulfill its obligations. GASB Statement No. 40 requires the disclosure of nationally recognized credit quality ratings of investments in debt securities, as well as investments in external investment pools, money market funds, bond mutual funds, and other pooled investments of fixed-income securities existing at year-end, such as Standard & Poor s, Moody s, or Fitch ratings of AA, AAA, etc. The Parkway invests in repurchase agreements and U.S. Treasury obligations through the State Board of Administration ( SBA ). U.S. government obligations and obligations explicitly guaranteed by the U.S. government and repurchase agreements are deemed to have no exposure to credit risk and are therefore excluded from the credit risk requirements of GASB Statement No. 40. Custodial Credit Risk Custodial credit risk for deposits exists when, in the event of the failure of a depository financial institution, a government may be unable to recover deposits, or recover collateral securities that are in possession of an outside party. Custodial credit risk for investments exists when, in the event of the failure of the counterparty to a transaction, a government may be unable to recover the value of investment or collateral securities that are in the possession of an outside party. GASB Statement No. 40 requires disclosure of custodial credit risk for deposits if the deposit is not covered by depository insurance and the deposits are uncollateralized or collateralized with securities held by the pledging financial institution or collateralized with securities held by the pledging financial institution s trust department or agent but not in the depositor-government s name. The Parkway has no deposits that meet the criteria. GASB Statement No. 40 requires disclosure of custodial credit risk for investment securities if the security is uninsured, are not registered in the name of the government, and are held by either the counterparty or the counterparty s trust department or agent but not in the government s name. The Parkway has no investment securities that meet the criteria. Concentration of Credit Risk An increased risk of loss occurs as more investments are acquired from one issuer (i.e., lack of diversification). This results in a concentration of credit risk. GASB Statement No. 40 requires disclosures of investments by amount and issuer for any issuer that represents 5% or more of total investments. This requirement does not apply to investments issued or explicitly guaranteed by the U.S. government nor to investments in external investment pools, such as those that the Parkway makes through the SBA or the State s general pool of investments. Therefore, the Parkway has no investments that require disclosure. Foreign Currency Risk Foreign currency risk exists when there is a possibility that changes in exchange rates could adversely affect an investment s or deposit s fair value. GASB Statement No. 40 requires disclosures of value in U.S. dollars by foreign currency denomination and by investment type for investments denominated in foreign currencies. The Parkway does not have a policy to address the foreign currency risk that may exist for its investments in the State s uncategorized general pool. Instead, it relies on the controls and safeguards provided by Section 17.57, F.S., as discussed above. The Parkway has no investments or deposits that are subject to foreign currency risk. 15

18 NOTES TO THE FINANCIAL STATEMENTS Interest Rate Risk Interest rate risk exists when there is a possibility that changes in interest rates could adversely affect an investment s fair value. GASB Statement No. 40 requires that interest rate risk be disclosed using one of five approved methods. Interest rate risk disclosures are required for all debt investments, as well as investments in external investment pools and other pooled investments that do not meet the definition of a 2a7-like pool. Also, disclosures are required for any assumptions regarding cash flow timing, interest rate changes, and other factors, as well as contract terms, such as coupon multipliers, benchmark indexes, reset dates, and embedded options that cause the fair value of investments to be highly sensitive to interest rate changes. The Parkway does not have a policy to address the interest rate risk that may exist for its investments held with the SBA. Instead, it relies on the controls and safeguards provided by Sections and , F.S., as discussed above. The Parkway s investments reported on its statements of net assets that are subject to interest rate risk consist of U.S. Treasury Notes and Bills held by the SBA. At June 30, 2011 and 2010, the maturity dates of these securities and their fair values are presented below using the specific identification method as provided by GASB Statement No. 40: July 15, 2010 $ - $11,807,490 December 31, ,450,212 July 14, ,122,974 - December 29, ,451,351 - $10,574,325 $15,257, DUE FROM OTHER GOVERNMENTS Department of Financial Services (Excess toll revenue) $0 6. DUE TO OTHER GOVERNMENTS Florida Department of Transportation (Operations, Maintenance, Roadwork) $2,648,767 Southwest Florida Water Management District $0 16

19 NOTES TO THE FINANCIAL STATEMENTS 7. CAPITAL ASSETS Changes in the capital assets of the Parkway for the fiscal year ended June 30, 2011 are shown below: Balance June 30, 2010 Additions Deletions Balance June 30, 2011 Highway System and Improvements Right of Way Land Buildings and Improvements Furniture and Equipment Accumulated Depreciation Totals $ 64,589,537 $ 0 $ (200) $ 64,589,337 10,089, ,089,680 2,037, ,037,562 1,795,522 16,730 (14,276) 1,797,976 (2,201,003) (138,499) 12,512 (2,326,990) $ 76,311,298 $ (121,769) $ (1,964) $ 76,187, BONDS PAYABLE On July 30, 1997, the Division of Bond Finance of the State Board of Administration issued and delivered $98,405,000 in Revenue Bonds on behalf of the Parkway. The proceeds derived from the sale of the 1997 bonds were used to finance a portion of replacing the east toll collection facility in Broward County; the west toll collection facility in Collier County; recreational access, fencing, lighting, and a comfort station; installation of new electronic toll collection equipment, and the reconstruction of approximately 19 miles of State Road 29, which intersects with Alligator Alley. Alligator Alley Revenue Bonds, Series 2007, were issued March 2007 to refund the outstanding $ million remaining from the Series 1997 issue as of June 30, These bonds are payable solely from, and secured as to payment of principal and interest by, a lien on the net revenues derived from the operations of Alligator Alley. 17

20 NOTES TO THE FINANCIAL STATEMENTS Bonds Payable as of June 30, 2011 are as follows: Serial Bonds, due in annual installments of $1,590,000 to $3,285,000, with interest rates ranging from 4.00% to 5.00%, maturing 2027 $ 37,395,000 Unamortized Premiums on Bonds Payable Less Amount Deferred on Refunding Bonds Payable as of June 30, ,564,398 (868,550) $ 38,090,848 Debt Service requirements to maturity as of June 30, 2011 are as follows: Year Principal Interest Total 2012 $ 1,590,000 $ 1,857,825 $ 3,447, ,660,000 1,790,250 3,450, ,740,000 1,707,250 3,447, ,830,000 1,620,250 3,450, ,920,000 1,528,750 3,448,750 Thereafter 28,655,000 9,290,750 37,945,750 Total $ 37,395,000 $ 17,795,075 $ 55,190, OPERATIONS AND MAINTENANCE AND PRESERVATION Routine operations and maintenance costs allow an asset to continue to be used during its originally established useful life. Typical daily costs such as toll booth operations and minor maintenance that allow the Parkway to operate on a daily basis are examples. Preservation costs extend the useful life of an asset beyond its previously established useful life. Also, preservation is the cost of maintaining the Parkway at a condition level established by the Department. The main example of preservation is resurfacing. Routine Operations and Maintenance (O & M) Preservation $7,071,639 1,738,213 Total O & M and Preservation $8,809,852 18

21 NOTES TO THE FINANCIAL STATEMENTS 10. EMPLOYEE BENEFITS Retirement Plan The Department participates in the Florida Retirement System ( FRS ), a cost-sharing multiple-employer public employee retirement system administered by the State of Florida, Department of Management Services, Division of Retirement, to provide retirement and survivor benefits to participating public employees. Chapter 121, Florida Statutes, establishes the authority for participant eligibility, contribution requirements, vesting eligibility, and benefit provisions. Staff working for the Parkway are employees of the Department. The contributions by and total payroll for the Department for the fiscal years ended June 30, 2011 and 2010 were a portion of the amount reported in the State of Florida financial statements. FRS issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by contacting the State of Florida, Department of Management Services, Division of Retirement, Research and Education Section, PO Box 9000, Tallahassee, Florida or by calling (850) Funding Policy The Department is required to pay all contributions for full-time and part-time employees. Generally, employee participation in FRS is compulsory. The contribution rates are as follows (including a health insurance subsidy of 1.11% effective July 1, 2001): July 1, 2006 through June 30, 2011 July 1, 2005 through June 30, 2006 July 1, 2004 through June 30, 2005 July 1, 2003 through June 30, 2004 Senior Management 13.07% 10.40% 9.29% 9.27% Regular Employees 9.80% 7.78% 7.31% 7.29% OTHER POST-EMPLOYMENT BENEFITS A. Retiree Health Insurance Subsidy In 1987, the Florida legislature established through Section , F.S., the Retiree Health Insurance Subsidy (HIS) to assist retirees of all state-administered retirement systems in paying health insurance costs. For the fiscal year ended June 30, 2011, eligible retirees and beneficiaries received as much as $5 per month for each year of creditable service completed at the time of retirement. The payments to individual retirees or beneficiaries at each year-end were at least $30 but not more that $150 per month. To be eligible to receive the HIS, a retiree under any state-administered retirement system must provide proof of health insurance coverage, which can include Medicare. HIS is funded by required contributions from FRS participating employers. For the fiscal year ended June 30, 2011, the System contributed 1.11% of payroll for all active employees covered by the FRS. This contribution was added to the amount submitted for retirement contributions and was deposited in a separate trust fund from which HIS payments are authorized. If these contributions fail to provide full subsidy benefits to all participants, the subsidy payments may be reduced or canceled. 19

22 NOTES TO THE FINANCIAL STATEMENTS In addition to the HIS, Section , F.S., provides that retirees may participate in the state s group health insurance program. The premiums are paid by the retiree. B. Deferred Compensation Plan The Department, through the State of Florida, offers its employees a deferred compensation plan created in accordance with Section 457 of the Internal Revenue Code. The plan, available to all regular payroll state employees, permits them to defer a portion of their salaries until future years. The deferred compensation is not available to employees until termination, retirement, death or unforeseeable emergency. All moneys, pensions, annuities, or other benefits accrued or accruing under and pursuant to Section 457 of the Internal Revenue Code and the deferred compensation plan provided for therein and adopted by the State of Florida; and all amounts of compensation deferred under the plan, all property and rights purchased with those amounts, and all income attributable to those amounts, property, or rights are held in trust for the exclusive benefit of participants and their beneficiaries. The State has no liability for losses under the plan but does have the duty of due care that would be required of an ordinary and prudent investor. The Department does not contribute to the plan. Participation under the plan is solely at the discretion of the employee. C. Compensated Absences Employees earn the right to be compensated during absences for vacation and illness. Within the limits established by law or rule, the value of unused leave benefits will be paid to employees by the Department upon separation from state service. 11. COMMITMENTS AND CONTINGENCIES A. Commitments Commitments on outstanding construction contracts for improvements and maintenance of the Parkway totaled approximately $782 thousand at June 30, B. Pending Litigation There is currently no pending or threatened litigation involving the Parkway. 20

23 Required Supplementary Information

24 REQUIRED SUPPLEMENTARY INFORMATION OTHER REQUIRED SUPPLEMENTARY INFORMATION INFORMATION ABOUT INFRASTRUCTURE ASSETS REPORTED USING THE MODIFIED APPROACH Pursuant to GASB Statement 34, Basic Financial Statements and Management s Discussion and Analysis for State and Local Governments, the state has adopted an alternative process to recording depreciation expense on selected infrastructure assets. Under this alternative method, referred to as the modified approach, the State expenses certain maintenance and preservation costs and does not report depreciation expense. Assets accounted for under the modified approach include approximately 12,082 centerline miles of roads and 6,647 bridges that the State is responsible for maintaining. In order to utilize the modified approach, the state is required to: Maintain an asset management system that includes an up-to-date inventory of eligible infrastructure assets. Perform condition assessments of eligible assets and summarize the results using a measurement scale. Estimate each year the annual amount to maintain and preserve the assets at the condition level established and disclosed by the state. Document that the assets are being preserved approximately at, or above, the established condition level. Condition and Maintenance Programs Resurfacing Program: Road pavements require periodic resurfacing. The frequency of resurfacing depends on the volume of traffic, type of traffic, pavement material variability, and weather conditions. Resurfacing preserves the structural integrity of highway pavements and includes pavement resurfacing, pavement rehabilitation, and minor reconstruction. The Florida Department of Transportation (FDOT) conducts an annual Pavement Condition Survey. Pavements are rated on a scale of 0 to 10 (with 10 being the best) in each of three criteria: ride smoothness, pavement cracking, and wheel path rutting. Ride smoothness is what the motorist experiences. It directly affects motor vehicle operation costs. Pavement cracking refers to the structural deterioration of the pavement, which leads to loss of smoothness and deterioration of the road base by water seepage if not corrected. Wheel path rutting refers to depressions in pavement caused by heavy use. Ride smoothness and wheel path rutting are measured mechanically using lasers. Pavement cracking is determined through visual observation by experienced survey crews. The condition rating scales were set by a statewide committee of pavement engineers, so that a pavement segment receiving a rating of six or less in any of the three rating criteria is designated a deficient pavement segment. In low-speed urban areas, the ride rating must drop to five or less 22

25 REQUIRED SUPPLEMENTARY INFORMATION before a pavement segment is considered deficient due to ride. The FDOT standard is to ensure that 80% of the pavement on the State Highway System remains non-deficient. Bridge Repair/Replacement Program: The FDOT Bridge Repair Program places primary emphasis on periodic maintenance and specified rehabilitation work activities on State Highway System bridge structures. The FDOT Bridge Replacement Program s primary focus is on the replacement of structurally deficient or weight restricted bridges on the State Highway System. In addition, this program addresses bridges that require structural repair but which are more cost effective to replace. The FDOT conducts bridge condition surveys using the National Bridge Inspection (NBI) Standards to determine condition ratings. Each bridge is inspected at least once every two years. During the inspection process, the major components such as deck, superstructure, and substructure are assigned a condition rating. The condition rating ranges from 0 to 9. A rating of 8 to 9 is very good to excellent which indicates that no repairs are necessary. A rating of 5 to 7 is fair to good which indicates that minor repairs are required. A rating below 5 identifies bridges needing major repairs or replacement. A rating of 4 or less indicates a condition of poor to failing and requires urgency in making repairs. A rating of 2 requires closure of the bridge and a rating of 1 is used for a bridge that is closed, but with corrective action may be put back into light service. A rating of 0 indicates that the bridge is out of service and beyond corrective action. In general, bridges that have a rating below 5 need major repairs or replacement. However, in isolated cases, bridges with a rating of 5 or greater can judgmentally be determined to need major repairs. The FDOT standard is to ensure that 90% of all department maintained bridges do not need major repairs or replacement. Routine Maintenance Program: The FDOT is responsible for managing and performing routine maintenance on the State Highway System to help preserve the condition of the highway system. Routine maintenance includes many activities, such as: highway repair, roadside upkeep, emergency response, maintaining signs, roadway striping, and keeping storm drains clear and structurally sound. The quality and effectiveness of the routine maintenance program is monitored by quarterly surveys, using the Maintenance Rating Program (MRP), which result in an annual assessment. The MRP has been used since 1985 to evaluate routine maintenance of the transportation system in five broad categories, or elements. The five rating elements are roadway, roadside, vegetation/aesthetics, traffic services, and drainage. The MRP provides a maintenance rating of 1 to 100 for each category and overall. The FDOT standard is to achieve and maintain an overall maintenance rating of

26 REQUIRED SUPPLEMENTARY INFORMATION Condition Rating for the State Highway System Percentage of pavement meeting FDOT standards % 88% 86% Percentage of bridges meeting FDOT standards % 95% 95% Maintenance Rating Comparison of Needed-to-Actual Maintenance/Preservation (in millions) Resurfacing Program Needed $751.5 $727.2 $871.5 $718.0 $898.1 Actual Bridge Repair/Replacement Program Needed $315.7 $231.0 $230.4 $250.3 $273.4 Actual Routine Maintenance Program Needed $580.5 $572.4 $508.2 $492.6 $463.7 Actual The FDOT determines its program needs based on a five-year plan. The needed amounts provided above are for estimated expenses and commitments relating to projects within the plan at the time of the budget request. The nature of a long-term plan is that it is continually changing. Projects are added, deleted, adjusted, or postponed. The differences between the needed and actual amounts above reflect these changes. 24